Obradovich: Private funding has raised ire before

Aug. 23, 2010

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Summer's winding down and school's starting up - time to get out the history books.

Today's lesson concerns fairly recent history, and comes courtesy of a friend who wrote me a note after a column last week.

I wrote last Thursday about former Gov. Terry Branstad's proposal to make over the Iowa Department of Economic Development as a public-private partnership. Some of the states he suggested as models, including Indiana, have private foundations that raise money and pay for things like travel and expenses related to wooing out-of-state corporations.

A friend reminded me that the Iowa Department of Economic Development has had its own foundation since 1963. A 2008 audit of the Iowa Department of Economic Development Foundation describes it as a separate, nonprofit corporation that exists for the purpose of "receiving and disbursing funds from public or private sources to be used to further the overall development and well-being of the state."

The foundation was at the center of a hornet's nest of controversy in late 2002, when then-Gov. Tom Vilsack announced it would contribute $50,000 to augment the salary of Mike Blouin, newly hired as director of the economic development department. Blouin had been lured from a higher-paying position with the Greater Des Moines Partnership. Developer Bill Knapp quickly raised $645,000 in pledges from executives of MidAmerican Holdings Co., Wellmark, Hy-Vee, Wells Fargo, Principal and other major Iowa employers for the foundation. The money was originally intended to pad salaries for Blouin and other state employees.

However, ethics questions arose about the propriety of private money ending up in state officials' paychecks. Can you imagine having companies that are in line for state assistance essentially bankrolling the DED director's paycheck? Neither could many Iowans. The plan was scrapped.

Meanwhile, the governor's office deleted a bunch of e-mails related to Blouin's hiring and the foundation - after the Register had already requested them under the state's open-records law. That led to Vilsack admitting he didn't know how to use e-mail, drawing widespread derision from Iowans. Overall, it was not one of the administration's most stellar moments.

Unlike some of the history lessons I recall from school, this one has a point. Iowa has plenty of civic-minded corporations willing to open their checkbooks to help the state grow. Branstad's proposal might help the state tap into that. But Iowa also has some relatively recent, first-hand experience with the ethical and transparency questions that come hand-in-glove with such activity. Branstad would need to structure such an organization so there are firewalls between private donors and state officials' bank accounts.

Mitch Roob, head of Indiana's development corporation, said in a Register story Sunday that taxpayers would balk at using private money on a $750 dinner for Chinese car makers, but private donors can foot the bill. Maybe so, but if state employees are on the guest list, the taxpayers better have a full and timely accounting of who paid for what.

Oversight is already a weakness in state government, including in DED. Culver has admitted mistakes related to the Iowa Film Office's failure to properly oversee tax credits for filmmakers, for example. He's promised better management, but we have yet to hear details from Culver about how he'll strengthen the existing department. The status quo won't keep Iowa competitive once harder-hit states begin to recover from the recession.

Both candidates want voters to see them as the one who will move Iowa forward. That doesn't mean they can turn their backs on history.

Political columnist Kathie Obradovich can be reached at (515) 284-8126 or kobradov@dmreg.com. You can follow her on Twitter at twitter.com/kobradovich. For more Obradovich columns, blogs and tweets, visit www.dmregister.com/Obradovich.